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Economy in Brief

U.S. Personal Income & Pricing Power Firm; Spending Growth Eases
by Tom Moeller  March 31, 2017

Personal income increased 0.4% last month (4.6% y/y) following a 0.5% January rise, revised from 0.4%. The gain matched expectations in the Action Economics Forecast Survey. The increase raised y/y growth to 4.6%, its best since May 2015. A strengthened 0.5% increase (5.5% y/y) in wages & salaries has raised growth in overall income. Rental incomes also were strong where a second consecutive 0.8% (6.5% y/y) increase occurred. These gains were accompanied by a 0.2% increase (3.8% y/y) in transfer receipts, powered by a fourth straight 0.4% rise (4.7% y/y) in Medicare payments. Proprietors income ticked 0.1% higher (3.6% y/y).

Disposable personal income increased 0.3% (4.4% y/y) following a 0.4% rise. After accounting for a 0.1% uptick in prices, the 0.2% increase followed three months of little change. The 2.3% y/y increase was below, however, its peak of 3.5% during all of 2014 and 2015.

The PCE chain price index rose 0.1% following a 0.4% jump. The y/y gain strengthened to 2.1%, its quickest rate of increase since March 2012. The index excluding food & energy rose 0.2%. The 1.8% y/y increase also approximated the strongest gain since 2012. The index for energy goods & services declined 1.3% (+18.4% y/y) and the food price index ticked 0.1% higher (-1.5% y/y).

Personal spending improved 0.1% (4.8% y/y) in February after an unrevised 0.2% increase. A 0.2% gain had been expected. When adjusted for higher prices, personal spending eased 0.1% (+2.6% y/y) after a 0.2% decline. Spending on durable goods eased 0.1% (+7.6% y/y) after a 1.1% drop. It reflected a 1.8% drop (+2.6% y/y) in spending on "other" durable products, but spending on home furnishings & appliances rose 0.5% (5.5% y/y). Recreational goods & vehicles spending rose 0.3% (10.8% y/y) and spending on motor vehicles improved 0.1% (8.7% y/y). Real purchases of nondurable products ticked 0.1% higher (2.8% y/y), but clothing purchases fell 1.1% (+0.4% y/y). Spending on gasoline & oil increased 1.4% (-2.3% y/y). Services spending eased 0.1% (+1.8% y/y) for a second straight month. Housing & utilities spending fell 0.3% (+0.3% y/y), but recreation spending jumped 0.5% (1.9% y/y).

The personal savings rate improved to 5.6% from 5.4%. It was the highest level since October. The level of personal saving declined, however, by 1.7% y/y.

The personal income & consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figure is in the AS1REPNA database. Further detail is in USNA.

The 2017 Budget and Economic Outlook from the Congressional Budget Office can be found here.

Personal Income & Outlays (%) Feb Jan Dec Feb Y/Y 2016 2015 2014
Personal Income 0.4 0.5 0.3 4.6 3.6 4.4 5.2
  Wages & Salaries 0.5 0.4 0.3 5.5 4.3 5.1 5.1
Disposable Personal Income 0.3 0.4 0.3 4.4 3.9 3.8 5.1
Personal Consumption Expenditures 0.1 0.2 0.6 4.8 3.8 3.5 4.4
Personal Saving Rate 5.6 5.4 5.2 6.0
(Feb. '16)
5.9 5.8 5.6
PCE Chain Price Index 0.1 0.4 0.2 2.1 1.1 0.3 1.5
  Less Food & Energy 0.2 0.3 0.1 1.8 1.7 1.4 1.6
Real Disposable Income 0.2 -0.1 0.1 2.3 2.8 3.5 3.5
Real Personal Consumption Expenditures -0.1 -0.2 0.4 2.6 2.7 3.2 2.9
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